Forrester weighs in on the agency client relationship

According to Forrester, no one type of agency has it all figured out. Good for integrated shops?

We have entered the era of “adaptive marketing.” We need to move from outbound messages to a more holistic 360-degree approach, from campaigns to experiences, from audiences to individuals.

Late last week I got a peek at Forrester’s new report “The Future of Agency Relationships,” a comprehensive four month study based on interviews with more than 50 agencies and advertisers.*

According to the 16-page report, marketers still need ideas (to make emotional connections); interaction (to reach, connect and most importantly be found); and, of course, intelligence (to optimize brand experiences and more importantly predict outcomes). But this is no longer as simple as identifying an insight, translating it into messages, and measuring awareness or transactions.

OK, so that’s not a revelation. For anyone who’s read David Meerman Scott, observed Zappos’ success, or filled their RSS reader with posts from BBHLabs, Faris Yakob or even this blog, none of this is earth-shattering news. In fact much of what’s published in Forrester’s findings was predicted a few years ago in the popular and influential Groundswell, authored, in fact, by two former Forrester researchers. Much of it is already in practice by progressive agencies and clients alike.

But to the credit of Sean Corcoran, Dave Frankland and Vidya Drego, Forrester has produced a focused and actionable report for both brands and agencies, especially those who are still trying to figure out what the heck to do in the age of Twitter, Flipcams, smart phones and crowdsourcing. It lays out some fundamental requirements for any brand trying to navigate the rise of social media and digital proliferation. And it suggests a course of action for marketers to take when it comes to managing their agencies. (Obviously there must be companies for whom this is all still new or there would be no market for this report.)

More importantly, because the report comes from Forrester, it’s likely to get read, followed, or at least quoted frequently, by marketers, CMOs, bloggers and even reporters in months to come.

Obviously Forrester wants marketers to heed their advice. If they do, agencies who’ve been asleep at the wheel are in for a wake up call. But for those striving to keep up with all the change, this could be an advantage.

Here are a few of the recommendations Forrester makes in its report.

Clients should demand ideas that offer versatility

Ideas today have to work across numerous platforms. Creative has to be media specific. There’s no more taking one idea and replicating it on everything from TV to YouTube to mobile. In fact even platform specific content may have to change on the fly in response to the real time web. Marketers and agencies alike should master a new skill: it’s called agility.

Map out all consumer interactions

In the adaptive marketing era, interactions have to generate conversations that stimulate participation. (Or as I like to say, “Advertising used to be about telling stories; now it’s about getting others to tell them for us.”) They should add up to a cohesive experience – listening, connecting, and responding – in a manner that creates valuable, long lasting relationships. And finally any approach to interaction has to stay attentive to the ongoing dialog that takes place with or without your brand’s participation. Forrester refers to the United Hates Guitars debacle, but there are dozens of others — Dominos Pizza, Comcast Must Die, Motrin Moms and most recently Nestle – to remind brands and agencies that interaction is a constant.

Define success through customer intelligence

According to Forrester, analytics becomes meaningless if they don’t understand the implications of every consumer behavior. If a consumer wants you to “know them and be relevant,” it’s essential that an agency use every form of data — structured or unstructured, online or offline — to make better decisions in close to real time. In short, you better know the value of every customer, fan and follower. And have a plan to convert all the charts, graphs, and metrics into action.

While Forrester doesn’t point fingers at anyone, they do make it clear that brands and marketers have to change their own organizations and processes. Among their many recommendations to clients are suggestions that marketers test partners from outside the agency world and embrace more incentive-based compensation models.

As for where this is all going, Forrester goes to the middle of the limb with these predictions:

  • we’ll see a new vocabulary (I’ve been suggesting this for the last six months; see slide below)
  • media will be managed more holistically (paid, earned, owned working together)
  • agencies and outsourced partners will become more important than ever (the world is too complex to figure it out alone)
  • the interactive agency of record will die (interactive will be part of everything so interactive and digital shops will have to step it up or fall into a niche role)

The new advertising vocabulary according to Creativity_Unbound

It’s easy to agree with Forrester’s findings. (I was fortunate to among those interviewed for the report.) I especially like the idea of embracing a new vocabulary as the words we use actually perpetuate old (or inspire new) behavior. If you’ve attended any of my presentations the slide to the left is, by now, a familiar one.  But Forrester’s validation of where things are going has me even more excited about the future and its opportunities.

No doubt you’ll be hearing plenty about Forrester’s report in days and weeks to come. In the meantime, however, I’d love to know your thoughts and reactions. Are you worried? Or excited? Working someplace that gets it?  Or thinking it’s time for a change?  Leave a comment.  And as always, thanks for reading.

More on the Forrester report:

The Future of Advertising in Creativity_Unbound

Memo to Marketers:  It’s Your Fault in Advertising Age

Original Report: for sale from Forrester

25 comments
Bud Caddell
Bud Caddell

Edward, wish I had the full report to review so I can sit in snippy judgment. Too bad. But funny how much of it rings true to a post I did a couple weeks back on complex adaptive systems and the intelligent organization: http://whatconsumesme.com/2010/posts-ive-written/your-new-job/

Not claiming 'FIRST' by any means, just maybe, 'HEARD IT ALREADY.'

Jeff Shattuck
Jeff Shattuck

Edward,

Great post. I’m going to try to answer your questions:

Are you worried? No. Change is healthy, and thank god this industry is being changed, like it or not!

Or excited? Definitely. Advertising has become a much more varied business and I love the role technology now plays. Nothing against pens and pencils, but compared to the Internet, they don’t do nearly as much for me.

Working someplace that gets it?
No, but let me define this a bit. First off, since a brain injury in 2006, I have not been able to work full-time, so have only been able to freelance. Before my injury, however, I worked for Grey San Francisco (don’t laugh!) and, in my opinion, GreySF “got it” big time. Prez and friend Casey Jones, yes, the creator of the ill-fated Enfatico, ran the place, and he drove the consolidation of all Grey operating companies in SF (Beyond Interactive, MediaCom, Grey Direct and Grey Worldwide and, um, damn, one other I can’t remember) into a single company, GreySF, in which all of these operating companies were under one P&L. He also hammered out deeply collaborative agreements with clients to not only measure GreySF’s performance, but also to measure that of the clients. Then we won Cisco. Yup, little old Grey SF, but Cisco reneged on the win only a month after it happened and forever lost my respect, especially, of late, as they have started running “the human network”, which was the last bit of creative thinking we did for them before they took the account and gave it to Ogilvy. After that, Casey’s focus changed and he left the agency and ultimately agency-side work. Then WPP bought Grey and destroyed Grey SF.

Or thinking it’s time for a change?
It’s always time for a change. That’s the problem with the agency world, it doesn’t seem to really want to change. But no worries, it’s being changed.

Last bits: like some other comment-leavers, I too think that the new vocabulary is at best shiny and at worst confusing. That said, I do like “engage” more than “target”!

Jeff
.-= Jeff Shattuck´s last blog ..S--t my Dad says. =-.

Ben Kunz
Ben Kunz

Thank you for this summary. A few thoughts:

1. The ongoing fragmentation of media and communication dynamics would suggest CMOs are better off setting up orchestrated teams of specialists vs. a single agency trying to do it all. It's very hard to make such declarations objectively while avoiding self interest (our own shop is a specialist) but I'm trying. Communication has become like a medical profession, many parts, many ailments, many specialists needed.

2. The elephant in the room, to mix metaphors, is the decision of who will manage this team of specialists. The internal marketing team? An overriding agency? The corporate communication body needs a case manager. Who will that be?

3. While I love your passion, I do think the "renaming" thing is a bit too much. Gurus have talked about renaming marketing dynamics for decades; in 1993 Don Peppers wrote The One to One Future suggesting we talk about "share of customer" instead of market share, "customer innovation" instead of product innovation, etc. etc. The reality is marketers have targets, they penetrate markets, they push leads through funnels. That has not changed. Nope.

4. It's all additive. Yes, we can build communities and collaborate. And people still want 60-inch flat panel TVS. Passive viewing of live television is still the dominant medium, and while online use and social media is beginning to erode that, it often overlays with concurrent media use. The average U.S. home has more TVs than people and consumers watch 35+ hours a week, almost as much time as spent at the office. (See latest Nielsen 3-Screen reports). The big opportunity may be to make social media a forum for responding to mass media push messaging. I hear few gurus talking about that -- instead social media is viewed as a "replacement" or "revolution" that requires radical new thinking. But instead, it could be another response mechanism.

In sum, it's not a or b, it's both a and b. Old dynamics still rule. New dynamics are emerging. Marketers need teams that can make it all work together.

Cheers.
.-= Ben Kunz´s last blog ..The failure of self-centered social networks =-.

some british dude called Alastair Duncan
some british dude called Alastair Duncan

Hi Edward
Interesting summary.
1) You are right in that much of this is happening already in the agency ecosystem. What remains a constant surprise is how 'new' this still is. There are differences as well internationally it's worth being aware of. CMOs in the US market do have a wider remit of control over marketing budgets and therefore can challenge the agency structures and silos in quite an upfront manner (as Dell, Microsoft and HP have done) in structuring a 'lower cost' supply chain. Trouble is, the silo mentality of the supply side of marketing is pretty deep rooted, as is the cost structure. A new model of collaborating is required, but not often properly funded.
2) Not so sure that the digital agency will die, the digital communications side of things is indeed a battleground and getting carved up, but the need for technology that's embedded in the business of 24/7 brand delivery really is harder for ephemeral campaign driven folks to grasp. Interactve agencies are at a crossroads. Will they evolve into upstream strategy partners or downstream production partners. We'll see more of that debate, and some more crunchy action around it in the coming year.
3) I've always liked asking a different question. Instead of "What kind of agency do brands need?" try "How can brand managers bring their brand closer to consumers, in ways that consumers will not only believe in (but buy an stick with?" Longer, but more relevant.

PS no self promoting link. Sorry about that :-)
.-= some british dude called Alastair Duncan´s last blog ..Nearly half of you wake up to Twitter (or Facebook) =-.

Giles (Webconomist)
Giles (Webconomist)

I find this statement: “According to Forrester, analytics becomes meaningless if they don’t understand the implications of every consumer behavior.” sounds like "don't forget to hire us to do all that research for you..." the {subtle} pitch.

I think Forrester missed the point of "creative" from PR agencies; they don't do design creative for ads, they create stories, compelling stories. They're good at that and will need to get better.

Otherwise, interesting report. yes, "intelligence" will increasingly play a vital role in strategy development.
.-= Giles (Webconomist)´s last blog ..Ad Agencies Biggest Challenge With Social Media =-.

Tom Cunniff
Tom Cunniff

I agree with much of Forrester's take on where we're going, but the "define success through customer intelligence" part of it is naive.

"According to Forrester, analytics becomes meaningless if they don’t understand the implications of every consumer behavior."

If this is true, let's pack up our spreadsheets and abandon all of our analytics right now.

In theory, every consumer behavior is rational, predictable, and able to be mapped to an eventual sale. Oh, and here's the cool thing: it all happens down a predefined sales funnel.

In reality, life is sloppy.

I think most of us would agree that choosing a spouse is more important than choosing a brand of toothpaste, and is more likely to be a "considered purchase" :-)

Yet anyone who believes we might successfully analyze the behavior of each young Romeo and Juliet from the moment they first see each other to the day they walk down the aisle and predict the outcomes with any success is seriously delusional.

The heart wants what it wants, in spouses and in toothpaste.

One reason direct response agencies are perceived as being better at analytics is because they are. They have no illusion that they can measure everything, and focus only on the few things that they really *can* measure.

The risk for marketers is that we will become "savant idiots": we will make so many assumptions about so many data points that we will no longer know why we're failing or even admit to it.

A good example of this is banner advertising. According to Doubleclick, in 1997, the average click through rate on online ads was 2.1%. In 2001 it was 0.5%. In 2008 it was 0.1%.

In other words, our best efforts at optimizing something radically simpler (people clicked, or they didn't) has led to us being 99.9% certaint that we will not get our desired outcome.
.-= Tom Cunniff´s last blog ..Nestlé Social Media Nightmare =-.

Stuart Eccles
Stuart Eccles

This is a really interesting piece, especially the point about

"agencies and outsourced partners will become more important than ever (the world is too complex to figure it out alone)"

This is something that could swing the entire value model around and works on a question I've tried to ask for the last year which is "What does a creative consultancy look like?"

But the scary part is the compensation models, I don't think anyone is even near working out good answers to that yet. Edward, was there anything more on compensation beyond incentive-based??

Stuart
.-= Stuart Eccles´s last blog ..Who is your real competition? =-.

Seth Simonds
Seth Simonds

"embrace more incentive-based compensation models."

Can you explain this a bit more? Do they mean to encourage more contests or to move away from a retainer system to one that pays a percentage based on results?
.-= Seth Simonds´s last blog ..The Mattress Test =-.

edward boches
edward boches

Bud:
Of course you've heard it all before. Where do you think Forrester gets its content? From us. Their report was sourced from agencies (including likes of Mullen, BBH Labs, Crispin, Edelman, others) and from leading clients who are progressive in space. Two key points. One, when Forrester talks people listen (at least marketers and not so up to date agencies.) And two, as Forrester will tell, despite that fact that there are plenty of people who do get this, the majority of marketers are way behind the most progressive agencies. I recently presented to top marketers at a current brand and no one had any idea what Foursquare was, never mind how it worked. We have more work to do.

Jeff Shattuck
Jeff Shattuck

Edward, true, and vocabulary can indeed drive change. Go with it!
.-= Jeff Shattuck´s last blog ..S--t my Dad says. =-.

edward boches
edward boches

Well, I'm going to keep using the new vocabulary anyway. I'm a believer that if you want to changes things a little bit you have to reach much further. Compromise will bring you back. You don't change an agency or a mindset with an occasional nudge. It takes a running start and huge push. Plus, as is evident by some of this conversation, it's thought provoking.

edward boches
edward boches

Not sure schmoozers matter anymore. You'll have to ask @bettydraper on Twitter and see what she has to say.

Jeremy Morris
Jeremy Morris

As for who 'owns' the fragmented team of specialists required to support client needs in this new world - simple. The entity that provides the most objective strategic solutions - which may or may not require a communications plan. Oh, and the entity with the best schmoozers obviously :)
.-= Jeremy Morris´s last blog ..Comfortably Numb: Too Many Companies Still Aren’t Listening =-.

edward boches
edward boches

You are a curmudgeon. And you're selling paid media. One, a large client can have multiple resources; tougher for smaller brands. And even if you sell one thing, you better damn well get good at understanding all the others. Two, some clients can manage it; others can't and don't want to. Our agency, for example, does this for many clients, or at least counsels them. In other cases we work as just one partner in a network. An agency has to be able to play all the roles. Three, disagree on the renaming. I don't expect anyone to actually start using the terms in place of, but if you think about them you realize that the words on the left perpetuate the old models of broadcaster/viewer, publisher/reader, programmer/user. It's not black and white anymore. There are not two distinct classes. Four, primary modes of communication and interaction have changed. For people over 30 TV is primary; for digital natives, interactive is primary. Both use TV and the web, but we/they have different primary modes. Guess what? One is the past; one is the future. Or as you said at the end of your comment, it's both. Marketers need...Thanks for your comments. Always among my favorite. Can't help debating you, though. I feel better now.

edward boches
edward boches

Everybody sells. Digital shops sell platforms. PR shops sell reputation management. Social types sell conversation. Forrester sells research.

edward boches
edward boches

Job definition is key. But let's face it, if things don't work you get fired anyway. Age of impatience we live in. Not sure where you get the increased cost of production and marketing. With crowdsourcing and custom fab, it strikes me that we have just the opposite.

Philip Rackin
Philip Rackin

Interesting post, and i look forward to reading the Forrester report. It is a topic near and dear to my heart. But one thing about performance based compensation models...

You are right that there are a lot of factors outside of the agency's control that can influence the success or failure of an initiative (distribution, manufacture, etc.). While there is a desire to have influence over these factors, the last thing a creative consultancy should do is try to insert itself beyond the scope of its expertise.

The short answer is that agencies getting into performance based compensation have to pick their clients very carefully, and then fully invest themselves into the process. You need to have a strong degree of mutual trust. If this is present, performance compensation is no barrier to innovative work. Actually quite the opposite.

The longer, and I think more interesting answer is the development of entirely new models for the collaborative development, marketing and fulfillment of products and services, with risk (and reward) spread across multiple actors.

We see some of this sort of thing going on at the bottom end of markets with the open source movement, and it is long practice in entertainment (where production and marketing costs have skyrocketed), but as the costs of developing and launching new products get higher and higher, I believe this shared model will become commonplace.

PR

Stuart Eccles
Stuart Eccles

Would performance based metrics be a disincentive to innovation/experimentation? Probably not if the end result is media-agnostic rather than execution-based metric.

I would love to see some non-standard examples of these metrics. An example we talk about is "innovation-credit" for a brand. The desire to be seen as the most innovative presence in a category. Often related to the "make us famous" brief.

It would also be interesting to see combinations of target-cost based contracts with performance-incentive contracts i.e. can we do more with less.
.-= Stuart Eccles´s last blog ..Who is your real competition? =-.

ben bradley
ben bradley

You nailed it. The agency is evolving into a creative consultancy - marketing and advertising is only a small piece of what the creative consultancy delivers. This evolution begins when the agency becomes a financial partner in the success of the client's business. Since the agency is "investing" in the client in terms of deferred fees, performance incentives and transparent pricing, the agency needs a voice in product design, distribution, service, fulfillment, et al. These things cannot be outside the scope of the relationship.

edward boches
edward boches

I only saw the 16-page exec summary. Obviously there is more as that is how Forrester will make money, selling the comprehensive report. But either way, I can't imagine there is that much more on the compensation topic. Progressive clients and agencies have been moving that way for a while. Basically it means that an agency makes more than it would if it exceeds pre-agreed to goals and makes less if it doesn't. Obviously this gets complicated if the agency has no input to product, distribution, service, fulfillment. So the goals are often rather specific. I think it's a good thing for high performing agencies. Though this is a separate issue from the recently debated procurement process that tends to devalue agencies, treating them like vendors.

edward boches
edward boches

Seth:
A better term would be performance-based compensation. Obviously commission based systems have been dead for years. Agencies typically get compensated for time (either in fees that represent time, or actual time charges, like a lawyer). Newer models -- some of which we practice and even encourage as it serves us well -- work by setting certain goals. Agencies either receive additional compensation for exceeding them, or sacrifice income for failing to reach them. Usually the agency offers some percentage of its guaranteed income, matched by what would be additional funding by a client. Then there are agree to goals that would determine to whom those funds go.

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  1. […] Edward Boches has got a nice handle on it and it’s reinforcing what he’s been doing over at Mullen. He calls it Adaptive Brand Marketing. It’s reinforcing what a lot of us have been trying to do recently. And it’s helpful because it’s clarifying and articulating some of the challenges we’re all going to be facing together, side by side, agencies and clients. And that can be soothing when things get bumpy. Which they will. […]